Here are the key things you need to know before you leave work today (or if you already work from home, before you shutdown your laptop).
MORTGAGE RATE CHANGES
So far no main bank has announced any rate changes, but Kookmin Bank has raised its floating rate by a full +100 bps to 8.50%. Nelson Building Society decreased its 1 and 2 year fixed rates. But ASB has apparently raised its home loan servicing rate by +25 bps to 8.75%.
TERM DEPOSIT/SAVINGS RATE CHANGES
Xceda Finance has increased all its rates from 6 to 18 months. The Cooperative Bank has raised rates for its online savings and bonus savings accounts.
NET WORTH DOWN, SAVINGS RATE UP
Statistics New Zealand figures show falling property values trimmed -$93 bln from household net worth, but in the December quarter rises in disposable income for household outstripped increases in spending.
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FARMER CONFIDENCE RISES OFF ITS ALL-TIME LOWS
Sheep and beef farmers and horticulturalists are now more optimistic about the prospects for the agricultural economy, while dairy farmers are more pessimistic, according to a Rabobank survey.
COMMODITY PRICES RISE AGAIN
Commodity prices rose again in March, both in world price terms, and in NZD terms. But it was a mixed bag among the various sectors. Stronger returns for meat largely offset weaker aluminium prices.
TIP OF AN ICEBERG? OR JUST A TINY SELECTIVE SET?
Consumer NZ said it had received over 300 examples of dodgy supermarket specials from its members as part of its campaign to clean up supermarket pricing. Among the examples were: 78 ‘specials’ which, on closer inspection, were not an opportunity to save; 54 instances of customers being charged more than the shelf price; 18 dodgy multibuys - where the products would have been cheaper if bought individually. Meanwhile, Foodstuffs pushed back at the claims, saying “We’ve been asking Consumer NZ for the details of the issues they say they’ve found in our stores for several months now, and to date they’ve provided seven examples, which we promptly looked into. Over the same period Consumer NZ say they’ve been collecting examples, our stores will have completed 100 million customer transactions.”
CHINA BUILDS NEW MOMENTUM
We now have the private Caixin services PMI, and that has confirmed the earlier reported strong rise in the official services PMI - showing a robust expansion there. It's the fastest pace of expansion in activity since November 2020, and comes with strong new order intakes following the end of their pandemic restrictions. New orders rose at the fastest pace in 28 months, with new export business expanding at the quickest rate since the series began in September 2014. The contrast with the US is worth noting, but to be fair the US expansion has been going on for very much longer and without the volatile turns.
SWAP RATES REVERSE
Wholesale swap rates have probably retreated lower after yesterday's OCR-induced jump. Certainly bond rates have, except the 1 year which is higher again. However, the real action in swap rates comes near the close. Our chart will record the final positions. The 90 day bank bill rate is up +24 bps at 5.49% after the OCR decision, and the standard premium restored. The Australian 10 year bond yield is now at 3.21% and down -3 bps from yesterday. The China 10 year bond rate is little-changed at 2.88%. And the NZ Government 10 year bond rate is now at 4.00%, and down -20 bps and the same as the earlier RBNZ fix at 4.00% and down -5 bps. The UST 10 year yield is now at 3.30% and down another -6 bps from this time yesterday.
EQUITIES MOSTLY BECALMED
The NZX50 is up +0.2% in late trade today, and is heading for a short-week fall of -0.2%. The ASX200 is down -0.3% in early afternoon trade and heading for a modest +0.3% weekly rise. Tokyo has opened down another sharp -1.1% in early Thursday trade. Hong Kong has opened little-changed while Shanghai has opened similarly. The S&P500 ended its Wednesday trade down -0.3%.
GOLD BACK DOWN
In early Asian trade, gold is up -US$12 from this time yesterday, now at US$2008/oz. It did close in New York earlier at US$2020 and in London at US$2031/oz.
NZD SLIPS BACK
The Kiwi dollar has fallen back about -¾c to 62.9 USc unable to sustain the sharp rise after the OCR hike. Against the Aussie we are unchanged 94 AUc. And against the euro we are softer at 57.8 euro cents. That means the TWI-5 is down at 70.7 and giving up all of yesterday's +50 bps rise.
BITCOIN RISES
The bitcoin price has fallen from this time yesterday, now at US$28,060 which is a drop of -2.1%. Volatility has remained modest however at +/-1.6%.
EASTER BREAK
This afternoon report will now take a break until Tuesday, April 11, 2023. But we will have a Weekend Briefing on Saturday morning. And there will be a range of interesting economic views released over this long Easter weekend for your reading pleasure. Stay safe on the roads, on the water, and in the mountains.
This soil moisture chart is animated here.
Keep abreast of upcoming events by following our Economic Calendar here ».
58 Comments
https://www.nzherald.co.nz/business/scarbro-construction-employed-60-no…
will cascade lots of stubbies go here
It’s keeping on happening. I said a few weeks ago that a pretty big one was about to collapse…this was the one
Weird how there’s not much in the way of analysis of this growing construction sector collapse, don’t you think?
Only one of NZ’s major employment sectors….
It just shows that even if you do a lot of work for KO there’s no guarantee you will stay afloat (a few people here like to think that KO work is the saviour for the slumping construction sector)
as you say lots of subbies will be hit. Many of these big construction companies try to keep their permanent staff numbers fairly low, and use lots of subbies.
Its like Déjà vu to be honest. The NZ construction industry goes from boom to bust every few years. Companies and suppliers fold then 3-5 years later they all start again and they all rinse and repeat.
Be a ton of cheap Utes soon.
More interesting is the lack of warning for all those young kids who were conned into becoming builders, developers and tradies over the last 10 years - with the promise there was more demand than supply of houses. So NZ needed them to take an apprenticeship and build build build... young RE agents too.
So now they will the the newbies and first to be cut..... its a bit like the FHB situ - encourage them to buy into houses and housing industries based on false logic. Parents, teachers and elders... take note - you have a responsibility to coach your kids on risk (and this is very high risk)
I've never met anyone who regrets having a trade behind them .
Yet
Ability to handle tools, is never regretted.
Except when you mishandle a wrench?
Sexist comment not allowed
:)
Correct. This is why we would be better with a stable OCR of about 3.25%, rather than these boom busts.
Yeah - but our generation of economists and bankers know best.... they dont need to learn from history :) lol
3.25% and there would only be a debt-fuelled Boom.
For stability an OCR of 8.25% would be ideal. It ensures that debt taken on is applied only to those areas of the economy that can show a productive economic return - also known as a real profit.
Low interest rates is what caused this mess that started way back with Greenspan (who now admits 'I got it wrong') and continuing them will just extend the problem, and when that inevitable Bust arrives, it won't be what we are looking at today. But far, far worse.
Great post. Debt limited to productive driven return/servicing. Sounds weird after decades of tax avoiding debt leveraged speculation.
Surely we should let the price of money find it's own level. Central planners put us in this position.
For sure.
but where’s the analysis, the discussion, in this site or others? It’s a big economic issue.
I am a big OneRoof critic but at least they are doing these articles, even if they aren’t digging in to the bigger picture.
They seem to have no staying power at all. Not that long ago building was absolutely going nuts, and they obviously still have some projects to finish, it’s a weird time to fall over. Sure if they had a couple of years of low demand I could understand it
Not as simple as that I am afraid to say.
Clean out the debt to creditors including IRD, then start over again fresh to make profit once more.
Construction isn't looking that rosy across the Tasman either,so the usual bolthole for kiwi tradies might not be an option either.
Rents are getting out of control there too;
https://www.news.com.au/finance/business/other-industries/melbourne-bui…
https://www.news.com.au/finance/real-estate/renting/rental-prices-risin…
"stubbies"
Is that a typo or a reference to builders who bought their shorts in the 70s?
Kiwi Bond rates haven't moved since December 8th; almost 4 months ago. In the same period the OCR has risen 100bps, and 1yr government bonds by 365bps. Given the current state of the government books you'd think Treasury would be trying a bit harder to attract to retail investors.
And surprise surprise, the banks havent raised call and savings rates before the 4 day holiday weekend.
Happy long weekend to all the staff at interest.co.nz too. The content has been great recently.
With the way house prices are falling watch National come out with some additional housing "grant" to try and juice the life back in to the sector much the same way the Scomo government did in the past. National wont be getting all that FIRE donation money without the industry expecting something in return,
Even worse they will probably bring back negative gearing...
And crank up the Accommodation Supplement. It's not landlord welfare, it's helping out hardworking kiwis 🤥
Indeed. Nats don't realise this is the main reason they are unelectable. Any party putting bank debt and profit ahead of citizens is so compromised they need another term in opposition.
The old strings don't pull anything, any more
And National are even worse than Labour (which is saying something) in terms of old strings.
PDK, you're a commenter I enjoy reading. Love to hear from you what political party is 'least worst' of them all - including the minority parties too.
PDK, is not only well read, researched and informative, but if I may take the liberty is, as with me, politically negatively neutral. I have a few years on him though,and believe that gives me an edge on cynicism.
Vote TOP, see what happens.
"unnecessary volatility in financial markets and the real economy," Toplis said."
The real economy is that Geo-political forces determine what we pay at the pump at that is still 60% of our total energy consumption. OPEC+ will make sure those prices remain elevated!!!
On the other hand the current account deficit remains at historical high levels and the latest reports from Fonterra, PF Olsen (Log exports) are not showing any encouraging signs. So with slowly diminishing exports we want to fund our increasing imports. No wonder overseas investors want more premium to fund our shortfalls. To protect us RBNZ has raised that premium. Simple as that. Just 101 economics.
A new report by found that ChatGPT’s ideal model of a “recession proof” investment portfolio includes large allocations (20%) in gold and other precious metals. This figure far exceeds the number proposed by prominent “gold bug” wealth managers such as Ray Dalio and Peter Schiff.
In summary, ChatGPT recommends the following asset allocation strategy to maximally protect one's investments from recessions:
- Bonds (40%): fixed-income government and corporate bonds and Treasury bills, including publicly listed aggregate bond indices.
- Defensive stocks (30%): blue chip stocks that are affected less by market fluctuations, such as healthcare, utilities, and essential consumer goods.
- Gold and other metals (20%): suggested a mix of physical and "paper-backed" gold and silver assets, including gold ETFs and mining stocks
- Cash and equivalents (10%): suggested U.S. dollars, money market funds, and certificates of deposit
Any asset held out side the banks is incredibly deflationary for a banks balance sheet........
But on the other side of the transaction, the cash you paid for the asset ended up where exactly?
It goes to the owner of the asset who may or maynot put it back into the banking system, Imagine if every NZer buys 1 ounce of physical gold..... at $3,125 each ounce, banks leverage that at 8 to 1.... how much funding do they need to replace.... or they could just not lend 8 times the withdrawls
It almost always goes into the banking system. Thats how I buy gold, I send money from my account to the gold merchant. Then the gold merchant sends it overseas, except of course they don't really, their NZD gets sent to whoever is doing the FOREX for them.
Point being, once its in the banking system using it to buy an asset does not remove the money from the banking system, it just gets transferred from one account to another. You might have removed your wealth from the banking system, but its now someone elses wealth in the banking system.
It only leaves the banking system as Physical cash stuffed under the matress.
Those numbers look way too rounded to be a decent computer calculated answer. It probably just pulled the info from some website.
Those numbers look way too rounded to be a decent computer calculated answer.
ChatGPT's whole schtick is that it looks like something a human would write, not a computer.
As a human if I’d done the calculations I wouldn’t round them so much as it looks like a guess.
I wonder if it has considered its own impact on those numbers. If it told people to buy gold and people believed it, then it would be a great time to own gold as everyone piled in. Likewise if it told people not to hold much of an asset it could trigger a selling spree which would then mean you should have owned none of that asset, an infinite loop of doom or gloom.
ChatGPT, the new dice...
Yeah you can’t really know where it got it’s data from and how accurate that data was. Imagine if it had trawled the local property investor websites or Tony Alexander’s articles.
I see MFB over on the NZX is about to go below market cap 50 mill. Remember the glossy promotions when it was flogged to (suckers) for 400 mill. How do these people sleep at night.
One big con
I do remember one high profile person calling BS on it.....
There was an unfortunate description used in his critique though, so once the woke attack mob went to work the actual valid criticism vanished from public view.
"woke attack mob"...including his own company Frank
I believe the initial shareholders/promoters will sleep very well!
Sadly you are right, one continuing to trumpet their gift to female business, and another on their multi-million dollar farm.
The OCR goes up [and] the >1 year swaps go down. That's just increased confidence in the RBNZ's control over inflation, right? It just wanted a small increase in the 1y mortgage rate to help it combat inflation and this will be so effective we don't need to change the two year. </s>
Guess we get to find out who's in charge here. Either, we are going to >6% OCR and the RBNZ wins, we get some financial repression and the banks continue on as normal or no one's got a clue and it's all about to fall over. No matter what, most of us lose.
Relative to when?
If it's to where we collectively were, before the ponzi phase we're still ahead. For now.
It it's to the peak of the ponzi - which looks like it was perhaps a year ago (but without the steroids was really 2007/8) then yes, anyone silly enough to be extended, will 'lose'.
This phase has been warned of for 50 years; nobody has anyone to blame but themselves.
Where two from here?
Seriously, this has been the result of 50 years of extend-and-pretend (with a few hiccups on the way: '87 etc). But the general direction was to new-build ever-more (stadiums, motorways), to maintain ever-less (Wellington pipes, the condition of SH1), and to rely on the future to repay the debt. In essence, we were living further and further ahead of ourselves, and fooling ourselves by believing the GDP dollars, but disbelieving/avoiding the debt ones (in recent times, several $ of debt to one of GDP).
When it started to unravel, they kept it artificially alive, and gained another decade - but all the real problems got worse in that time (totally unsurprisingly). Now its getting to the stage they can't stop the unravelling - so ask where the floor is?
And it's a house-price where someone can service the payment pretty much ex-usury. Whats that? $50,000? In a world not taking on debt, who could stump up more? So I think the floor is going to shock some folk. For those of us who just bought a house and cleared the mortgage; we have a house, and a house is a house is a house. Some may be in a position to keep servicing underwater loans. A heck of a lot won't - and that will include landlords parasiting atop tenant incomes which were reliant on housing happening.
I agree with a lot of this, but just to note our debt to gdp ratio of 30% is one of the absolute lowest in the OECD.
The reason for our decline in living standards has been the failure to build the necessary infrastructure (I believe from nz infrastructure institute the debt is around $120bn and growing) that was needed. Successive generations voted for lower taxes, lower rates, lower spending and now the piper is calling. Low productivity, crumbling infrastructure, skills gaps and a society fracturing around house ownership lines.
We used to make things in this country. Build things. Now we just stick our hands in the next guys pocket.
We're deeply invested in the import-and-sell sectors of our economy that relies on bringing more consumers from overseas. The stretched domestic supply lines are not helping here and exporters elsewhere in the world won't even get out of bed if our consumer base grew to 20 million.
Yet politicians and shoddy businesses are sticking to their lie that a bigger NZ increases our purchasing power as a nation.
Yup. Debt now devalues future labour - and the last few decades have seen a gradual decline to further devaluing of labour via lower and lower interest rates.
The only way to keep devaluing labour whilst maintaining living standards is to keep inflating the dollar, but that only works while the labour pool itself is growing. At some point, we hit the finite limits of our resources - which we are seeing in many countries where the devaluation of labour itself has led to less labour being produced.
The last ~150 years of oil-backed growth made us astonishingly efficient with our labour (I'm going to ignore that the results of that efficiency were not shared equally - that is cultural not physical). That efficiency will disappear as we continue to deplete these resources.
The only real technology that can compete with that efficiency is nuclear - but that has a massive stigma, and some significant logistical issues.
As it stands, we are left with two options: (1) we recognise the future needs to be respected, price it accordingly, and adjust our lifestyles to suit; or (2) we wait till calamity hits us (via either an energy or labour crisis) and we're forced to do so anyway, regardless of our level of understanding. I'm of the opinion we're past the inflection point heading towards option (2).
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